ICHRA Employee Classes: 11 Types, Size Limits, and Rules

Federal regulations under 26 CFR 54.9802-4 permit employers using an individual coverage health reimbursement arrangement to divide their workforce into 11 specific ICHRA employee classes, and those classes are the only permitted way to offer different reimbursement amounts to different workers.¹ You cannot invent your own categories. You lock in which classes you will use and how you define them before the plan year starts, and you cannot change them mid-year.

The 11 Permitted Classes

Full-time employees. You pick the definition: the ACA’s 30-hour-per-week standard under Section 4980H, or the simpler “not part-time” definition from IRS self-insured plan rules.
Part-time employees. The mirror of whichever full-time definition you chose.
Salaried employees. Workers paid on a salary basis.
Non-salaried employees. Hourly workers and anyone not paid a fixed salary.
Geographic rating area. Employees whose primary work location falls within the same insurance rating area defined by federal marketplace rules. This lets you offer different amounts to employees in expensive versus cheap insurance markets.
Seasonal employees. Again, either the ACA definition or the self-insured plan rules definition.
Collectively bargained employees. Workers covered by a specific collective bargaining agreement.
Waiting-period employees. Workers who have not yet completed a coverage waiting period, provided the waiting period complies with the federal 90-day limit.
Non-resident aliens. Foreign employees with no U.S.-source income.
Temporary staffing employees. Workers placed at your company by a staffing agency that is the common-law employer.
Combination classes. Any mix of two or more of the classes above.

Every employee within a class must receive the same reimbursement terms. You can decline to offer an ICHRA to a particular class at all, but within a class you cannot pick and choose based on health status or individual characteristics.¹ Former employees stay in the class they belonged to on their last day of work.

How Much You Can Vary Within a Class

The same-terms rule has two built-in exceptions that let reimbursements track the real cost of individual coverage.

You can increase the amount as employees get older, because older workers face higher individual market premiums. The cap is a 3-to-1 ratio: the amount offered to your oldest participant cannot exceed three times the amount offered to your youngest.² That mirrors the ACA’s own age-rating band for individual premiums.

You can also vary amounts by the number of dependents an employee covers. An employee with a family pays more for coverage than a single employee, so offering more for larger households keeps the benefit meaningful. The variation just needs to be reasonable — for example, $400 per month for employee-only, $600 for employee plus spouse, and $900 for a full family.

These variations do not create separate classes. An employer offering $300 per month to a 25-year-old single employee and $700 to a 60-year-old employee with dependents can still treat them as one class, so long as the age ratio stays within 3-to-1 and the family-size tiers apply uniformly.

Combining Classes

The combination class is where most of the design flexibility lives. You can layer any of the 10 base classes together. A common example is part-time employees within a specific geographic rating area. Another is salaried employees covered by a collective bargaining agreement.

The catch: every rule that applies to any underlying class carries into the combination. If one of the base classes triggers a minimum class size requirement, the combined class must meet that threshold too. The one exception is that combining any class with waiting-period employees removes the minimum size requirement entirely.³ And as with any single class, everyone in the combined class must receive the same reimbursement terms, subject to the age and family-size variations above.

Minimum Class Size Rules

The minimum class size requirement stops employers from carving out tiny groups that effectively target specific individuals. It only kicks in when you offer a traditional group health plan to at least one class while offering an ICHRA to a different class. If every class gets an ICHRA and you have no group plan at all, minimum class sizes do not apply.¹

When the requirement does apply, the threshold depends on your total headcount at the start of the plan year:³

Fewer than 100 employees: each applicable class must have at least 10 employees.
100 to 200 employees: each applicable class must include at least 10 percent of total employees, rounded down.
More than 200 employees: each applicable class must have at least 20 employees.

Classes That Can Trigger the Minimum

Only five base classes trigger the minimum: full-time, part-time, salaried, non-salaried, and geographic rating area when defined below the state level. Even then, the full-time and part-time classes only trigger the requirement when one gets a traditional group plan and the other gets the ICHRA.

Classes That Are Always Exempt

Several classes never face a minimum size requirement, whether or not you also offer a group plan:

Seasonal employees
Collectively bargained employees
Waiting-period employees
Non-resident aliens
Temporary staffing employees
State-level geographic classes. If you define a geographic class at the state or multi-state level rather than by county or rating area, no minimum size applies. A single remote employee in another state can be their own geographic class.

If a class falls below the applicable threshold at the start of the plan year, that class is invalid. That can unravel the entire arrangement and expose the employer to tax consequences, so check the math before locking in your design.

The New Hire Class

The new hire provision is a separate transition tool that lets you move from a group health plan to an ICHRA without disrupting current employees. You keep the group plan for workers already on the payroll and offer the ICHRA to everyone hired on or after a specific date.²

The date must be applied consistently across all employees within the broader class. You cannot cherry-pick a date that sorts healthier employees into one bucket and sicker employees into another. Once set, the date sticks. The group plan and the ICHRA remain separate tracks: you cannot offer both to the same class at the same time, and an individual employee cannot be enrolled in both. Over time, as pre-date employees leave and post-date hires accumulate, the workforce migrates to the ICHRA on its own.

How Class Design Affects Employees’ Premium Tax Credits

Class design is ultimately an affordability calculation. If an employer offers you an ICHRA that is considered affordable, you are ineligible for premium tax credits on the ACA marketplace, even if you decline the ICHRA.⁴ You are treated as having access to employer-sponsored coverage. The only way to reclaim premium tax credit eligibility is if the ICHRA offer is unaffordable and you opt out of it entirely.⁵ You cannot split the difference: an employee cannot use ICHRA reimbursements for some expenses and claim premium tax credits for the rest.

The Affordability Formula

For the 2026 plan year, an ICHRA is affordable if the employee’s remaining cost for the lowest-cost Silver plan on the local marketplace, after subtracting the monthly ICHRA allowance, does not exceed 9.96 percent of household income.⁶ The Silver plan cost is based on the employee’s age and work location. For remote workers, it uses the employee’s home ZIP code. This is one practical reason geographic rating area classes exist: employers in high-cost insurance markets may need to offer larger reimbursements to keep their offers affordable, and geographic classes let them do that without overpaying employees in cheaper markets.

Employer Mandate Exposure

For applicable large employers (50 or more full-time equivalent employees), an unaffordable ICHRA can trigger penalties under Section 4980H of the Internal Revenue Code. If an employee receives premium tax credits because the ICHRA was unaffordable, the employer faces a per-employee penalty. For 2026, the penalty for failing to offer coverage to at least 95 percent of full-time employees is $3,340 per full-time employee (minus the first 30), and the penalty for offering unaffordable coverage is $5,010 per affected employee. Setting reimbursement amounts by class is a benefits design decision on the surface and an affordability calculation underneath.

1
eCFR. 26 CFR 54.9802-4 – Special Rule Allowing Integration of Health Reimbursement Arrangements
2
Federal Register. Health Reimbursement Arrangements and Other Account-Based Group Health Plans
3
eCFR. 26 CFR 54.9802-4 – Special Rule Allowing Integration of Health Reimbursement Arrangements
4
Internal Revenue Service. Questions and Answers on the Premium Tax Credit
5
eCFR. 26 CFR 1.36B-2 – Eligibility for Premium Tax Credit
6
Internal Revenue Service. Revenue Procedure 2025-25